Minnesotans have only a few more days to shop tax-free on Amazon.
The online retailer says it will start collecting sales taxes from Minnesota residents on Oct. 1.
Why start charging sales tax now?
Amazon has expressed interest in expanding its business in Minnesota. If Amazon has a physical presence in the state, it's required by law to charge residents the state sales tax on online purchases, according to the Minnesota Department of Employment and Economic Development.
Does anyone outside Amazon know its plans for Minnesota?
No. Amazon has said it is considering various opportunities to expand in Minnesota, but it won't say what form that expansion could take.
Speculation has centered on some sort of distribution center. Marc Wulfraat, who runs a supply chain and logistics consulting firm, told MPR News' Martin Moylan that Amazon has a record of opening warehouse facilities in states where it starts to collect sales taxes.
How would a Minnesota distribution center benefit Amazon?
Wulfraat suspects the Twin Cities — with its population of about 2.5 million — would be a priority market for Amazon. The company's closest so-called "fulfillment center," in Kenosha, Wis., will be up and running by the end of this year. Wulfraat expects Twin Cities orders would be packed at the Kenosha center and sent to a distribution facility in the Twin Cities area, which would sort packages and hand them off to the U.S. Postal Service for delivery.
Wulfraat said that sorting centers, which typically employ 200 to 300 people, "are an important component of Amazon's strategy to shift volume away from more expensive primary carriers like UPS and FedEx." Opening such a center in Minnesota, he said, "would make perfect sense."
What does this mean for consumers?
Shoppers who were lured by a market free of sales taxes may not find Amazon as attractive an option. According to the Amazon website, the company charges sales tax on all the same items regular retailers do. A pair of jeans will still be exempt, but a flat-screen TV will be subject to the same state sales tax, about 6.8 percent, charged by other retailers.
How will customers likely react?
Shoppers who flocked to Amazon to find the best deals may now look elsewhere. A recent study by the National Bureau of Economic Research analyzed how consumers behaved in other states after Amazon began collecting sales tax.
Amazon sales in California, New Jersey, Pennsylvania, Texas and Virginia fell by 9.5 percent after the retailer began charging state sales tax, the study showed. At the same time, sales by Amazon's online competitors increased.
Amazon may feel the most pronounced effect on sales of big-ticket items. The study found that consumers were more likely to seek out other avenues when purchasing items worth more than $300.
MPR News reporter Martin Moylan contributed to this report.